Accounting transactions can get entered incorrectly into an accounting system, or perhaps a transaction should have been split into two different general ledger accounts, for example.
Either way, when this happens you have to make changes to your original transaction after it’s been recorded, and you can do this easily in QuickBooks accounting software by making a journal entry.
You can make journal entries in QuickBooks to adjust or correct transactions and post entries that cannot be performed in other ways, such as adjustments to profit or loss.
The journal entry process is fairly straightforward, but you can only make a journal entry for one customer or vendor at a time. If you want to correct multiple customer or vendor balances this way, you’ll have to post separate entries. QuickBooks does not have a bulk entry option, although QuickBooks 2017 introduced some time-saving data entry options.
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What Is a Journal Entry?
A general journal entry is an accounting transaction that is entered, or posted, directly to the general ledger. A company’s general ledger acts as its main group of accounts used to record balance sheet and income statement transactions.
For example, you may have entered the monthly $100 utility bill into your company’s insurance expense account by accident. You can post an adjusting journal entry to reduce, or credit the insurance expense account by $100 and increase, or debit the utility expense account by $100 to correct your mistake. All your accounts would then be in proper order, and you wouldn’t have to change the amount owed by your vendor because that portion of the transaction was recorded properly.
Journal Entries for Year-End Activities
Your certified public accountant or bookkeeper might want to make journal entries to complete year-end activities, such as posting tax adjustments to your books, recording depreciation expense or reclassifying revenues and expenses. Your accounting professional can provide you with specific information if you want to post the journal entries yourself at year’s end, along with explanations for why the entries were necessary for your particular situation.
How to Make General Journal Entries in QuickBooks?
You can make general journal entries in QuickBooks by following these step-by-step instructions:
Go to Company > Make General Journal Entries from the menu at the top of the screen.
Change the Date field, if necessary, in the Make General Journal Entries window. QuickBooks will default to the current date so if you want to post an entry for a previous month or year, be sure to change it so that your entry gets recorded in the proper financial time period.
Enter a number for your journal entry in the Entry No. field. QuickBooks will automatically number subsequent journal entries sequentially.
Enter the general ledger account number In the Account column. You can also select the first account from a drop-down menu in the Account column.
Enter the debit or credit amount for the account you’ve selected into the Debit or Credit columns. The debits and credits must be equal to make the entry balanced and allow QuickBooks to post the entry.
Enter a descriptive memo in the Memo Column. It will be displayed on reports that include this journal entry. This step is optional, but it’s recommended so that you’ll remember later why the entry was made.
Repeat Steps 4 through 6 until the entries completely offset each other and the transaction reaches a zero balance. Your total in the Debit column should equal the total in the Credit column, and the journal entry will then be properly balanced.
Click Save & Close to save the journal entry and close the window, or click Save & New to save the journal entry and open a new window.
You can make most general journal entries in QuickBooks using these steps, but if you want to make journal entries that affect a particular customer’s account receivable or a vendor’s accounts payable, you’ll have to put the customer or vendor on the first line of the entry.
The QuickBooks program is designed to automate certain aspects of financial management and accounting, and can help you manage your business accounts. QuickBooks records certain data automatically when transactions occur — for example, at point of sale in a retail or other commercial organization. However, sometimes you may need to record data manually, which is what general journal entries are intended for.
Recording
QuickBooks is accounting software, so its purpose is to record and manage your business accounts. In most cases business managers manage the finances of a company in conjunction with professional accountants. QuickBooks is designed to function within this context, as you can import and export accounts for your business, allowing you and your accountant both to carry out alterations on the data.
Accounting
The accounts generated by QuickBooks should ideally contain everything you need to keep your business’s finances in order. For certain businesses, and depending on how QuickBooks is set up, your accounting information may not be complete without manual additions to the data that is collected automatically. For example, if you need information that is not automatically generated and recorded as part of your transaction process, you may need to make a manual addition using a general journal entry.
Process
With general journal entries in QuickBooks, managers and accountants can record transactions, or transfers of amounts between accounts. To add a general journal entry, choose “Company,” then “Make General Journal Entries” within the QuickBooks interface. From there you can enter the details of the entry, including which accounts the data is associated with, the debit or credit in question, any customers, employees or others associated with the data, and other optional information.
Options
General journal entries present a range of options. For example, you can opt to include a memo, which will then appear in your QuickBooks reports, or specify that an amount entered is billable, which automates the billing process for the transaction. The details you include in a general journal entry depend on the nature of the data you are recording, but your distribution lines must result in a zero balance when the entry is complete.
QuickBooks offers several methods for tracking inventory. All methods create journal entries when inventory changes occur. However, some QuickBooks users prefer to manually make journal entries to adjust for inventory fluctuations. The journal entry format is more familiar to some accountants and retail store owners than other tracking systems. If you choose to record inventory changes in your journal, you must create an asset account for your inventory before you’re able to enter inventory adjustments in your journal entries.
QuickBooks makes it easy for you — an accountant — to record journal entries. If you’ve spent any time working with QuickBooks, you may know that most of the journal entries that get recorded in the QuickBooks data file are recorded automatically.
To record a journal entry, choose Company→Make General Journal Entries. QuickBooks displays the Make General Journal Entries window, as shown here
You can probably figure out how to use the Make General Journal Entries window yourself. You enter the general journal entry date in the Date box. You use the Entry No. box to number journal entries or to assign them some meaningful code. After you provide this basic information, you use the columns of the Make General Journal Entries window to record the journal entry.
You don’t need anyone to tell you that the general ledger account number or name goes in the Account column, the debit amount in the Debit column, and the credit amount in the Credit column. You may find it useful, though, to be reminded that you can use the Memo column to enter some description of the debit or credit; you can use the Name column to identify the customer, vendor, employee, or other name associated with the credit or debit; you can use the Billable column to indicate that the debit or credit should be listed as an amount to be billed to the named customer; and you can use the Class column (if you’ve turned on class tracking) to classify the debit or credit.
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A QuickBooks Refresher on Journal Entries
In traditional accounting, the journal entry is a record of a transaction in which the total amount in the Debit column equals the total amount in the Credit column, and each amount is assigned to an account on the chart of accounts. For the day-to-day transaction entry, QuickBooks® uses familiar forms (invoices, bills, checks, etc.) and the back-end journal entries are created automatically. When a transaction is entered directly into a non-bank balance sheet account register, QuickBooks automatically labels the transaction GENJRNL in the register and General Journal on reports that list transactions.
In traditional accounting systems, various closing procedures must be performed. QuickBooks automates this process by automatically transferring net income into the Retained Earning account at the beginning of a new fiscal year when Balance Sheet reports are generated. A journal entry is not created for this process, the net transaction amount just appears in the Retained Earnings account.
The net profit or loss each year should be “closed” into an account other than Retained Earnings. One is to change the name of the account (i.e., for a sole proprietorship change the name of Retained Earnings to Owner’s Equity). The second alternative is to create a journal entry to reclassify the amount correctly (i.e., reclassify retained earnings to various partner accounts). To protect the integrity of the data for the future, use the password protection feature of closing dates.
A manual journal entry can be made from the Company pull down menu. In traditional accounting systems, to “post” is to transfer data from the book of original entry to a ledger. In QuickBooks, the original entry is on a form (invoice, bill, check, and so on), and the equivalent of a ledger is a report. QuickBooks handles all posting automatically and immediately when forms are recorded.
QuickBooks also allows you to correct mistakes by editing and recording the original form again at any time. To protect previous records from accidental change, use a QuickBooks password and closing date.
Entries for depreciation, tax provisions, etc. must be made in the more traditional fashion. For clients using job costing reports, there are several places which do not permit a customer to be assigned to the amounts, so a journal entry is required to reclassify the amount within the same account from no name (i.e., blank) customer to the correct customer: job.
With many traditional software packages, any adjustments are handled through journal entries in the general ledger. In QuickBooks, however, the creation of journal entries, and their impact on the financial statements, may not achieve the desired results, and are better handled through the use of the appropriate form or transaction entry page.
Each transaction is recorded in the general ledger via journal entries. A report can be prepared that presents the details for each transaction. This report, by default, includes the feature of collapsing the detail lines for the same account into one line. This is indicated by the notation of multiple in the memo column. To see the individual detail lines, click on the Expand button at the top of the report. This report can also be filtered for a specific transaction type (for example, journal), by date entered/modified, by a specific memo, etc.
Journal Entries
Typical journal entries for QuickBooks include booking depreciation entries, income tax provisions, and loan interest adjustments. If a journal entry is in fact needed, consider the following rules:
Only one Accounts Receivable or Accounts Payable type account per entry.
On the journal entry itself, use the Accounts Receivable or Accounts Payable account on the second line of the journal entry so that it properly posts.
Any entry to an Accounts Receivable or Accounts Payable type account will require a customer or vendor, respectively.
If QuickBooks is used as a write up program and Accounts Receivable or Accounts Payable detail is provided from another system, it is usually more efficient to create the accounts using the Other Current Asset or Other Current Liability type accounts.
All journal entries may be considered to be cash basis, regardless of the accounts affected based on where the Accounts Receivable and Accounts Payable accounts are placed in the journal entry.
Journal entries should not be made to inventory or payroll accounts. To do so may create subsidiary reports that do not agree with the general ledger.
Entries can be made to correct class entries by choosing the same account for the debit and credit and only making the class designation different. This will re-allocate between classes, while leaving the General Ledger account the same.
As each journal entry is saved, the General Ledger is automatically updated.
To create a report of just the journal entries, filter the Transaction Detail by Account report or the Audit Trail report for the transaction type of journal. If only the accountant journal entries are to be printed, choose the entered/modified date from the point that the financial statement reconciliation work began to the current date.
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